I'm an associate editor at Forbes, part of the team responsible for our signature issues: The Forbes 400, Global Billionaires and America's Richest Families. As a writer, I cover these wealthy business builders as well as other entrepreneurs. Before Forbes, I also reported on entrepreneurs for Inc. magazine and attended Syracuse University's S.I. Newhouse School of Public Communications.

Fiscal Cliff Update: Obama Smartly Shortens Vacation To Resume Talks

The president in Hawaii, at Pearl Harbor, four years ago. (Photo credit: Wikipedia)

President Obama will soon renew work on a fiscal cliff resolution, cutting short the first family’s trip to Hawaii, commander in chief’s birthplace. The president may leave as early as this morning. Congress, meanwhile, is expected to file back into the nation’s capital on Thursday.

Here’s where they left off: President Obama last Friday said he wants a pared-down plan that would prevent middle class tax hikes and keep unemployment flowing for 2 million Americans by Jan. 1. “This is something within our capacity to solve. It doesn’t take that much work,” the president said in a nationally televised address.”We just have to do the right thing. So call me a hopeless optimist, but I actually still think we can get it done.”

The president’s remarks came less than 24 hours after House Republicans staged a revolt against the GOP leader, John Boehner; under his plan, taxes would increase for Americans earning more than $1 million—roughly 0.3% of the population—but that proved too much for the adamantly antitax wing of the Republican House. Earlier in the week, in efforts to try to strike a bargain, Obama relented on his stance to raise taxes on Americans making more than $250,00 and said he would agree to moving that figure to $400,000.

Considerable work awaits the pols’ return to D.C. The two parties remain considerably apart. It’s unclear whether moderate Republicans can muster support for a compromise bill, especially after Boehner failed to gain enough votes for his bill. Make no mistake: Senate Republicans, led by Mitch McConnell, have given no indication that they would stall the process. It’s House Republican that seem most likely to prevent any bill containing tax increases to pass, and Democrats have vowed to include tax hikes in any bill. (Though, you can see that the exact level where the increases begin remains fluid.)

What’s at stake? Possibly a recession in the first half of the new year, brought on by the series of tax hikes and spending cuts that will take effect next Tuesday. And how can we monitor investor sentiment? Keep your eyes on the sleep-well-at-night stocks, like Procter & Gamble, Ford and Coca-Cola. Large caps like these are bought when investors seek safety. Threat of a recession will likely trigger that. Also, monitor bellwethers like Apple and FedEx. Both serve as excellent measures of sentiment—highly trafficked shares of companies with a wide, international business.

Stock nudged higher after the opening bell. The Dow Jones industrial average added 0.2% to 13,159.37. The S&P 500 rose 0.1% to 1,427.62. And the Nasdaq composite increased 0.1% to 3,016.97.

Two tech stocks propped up the Nasdaq. Research in Motion jumped 6.1%. Facebook gained 0.6%.

Nearly all attention this week will center on the fiscal cliff. Precious few economic reports will come. The Case-Shiller Home Price index this morning will be released at 9. New home sales and consumer confidence figures come tomorrow; an earlier measure of consumers showed Americans have limited their spending in this crucial holiday season, weighed down by uncertainty about their paychecks next year.

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If the taxes to be raised are so insignificant in the scheme of things as you point out, then why is the President being so stubborn on that point? The 80 billion raised would not even fund government for two weeks.

The Fiscal Cliff has devolved into a class warfare theater when it’s not necessary to have that drama.

No, the Democrats must pretend that the rich are the source of all our problems and it plays well with the rest of the anti-American themes of the Democratic Party.

A report was released earlier this year which pinpointed over 100 billion in waste from just duplicitous federal programs. That doesn’t include the waste in Medicare and Medicaid. That’s probably close to 80 billion a year.

Just work to solve those two sources of waste and you could pay for health care for the entire nation and without any tax increases.

No, it’s better to have a class warfare debate while the nation’s economy founders. Is that a violin I hear playing in the background? It’s the Nero government style at its highest levels.

Raising taxes on less than .3% of the population won’t accomplish anything and that’s what I was referring to as a big point in your article. As far as a mix of spending cuts, the Democrats adamantly refuse to cut spending on anything.

As opposed to simply writing about an insignificant tax increase, why not an article on how the proposed spending cuts are soft cuts which simply slow the growth of spending? Over the last 20 years there has been a significant increase in spending and also a significant increase in tax revenues but there have been zero spending cuts. In fact, government has grown and continues to grow exponentially while the public sector founders.

Unless there are real spending cuts the government wins the game with hard tax increases but soft spending cuts. And that’s precisely what will happen. There will be no spending cuts.

To indicate that there will be any spending cuts contradicts history and belies the will of the ruling class to keep spending until the natural forces of economics rights the boat.

Bill, in accordance to the CBO estimates, total federal income tax revenue for the top 1% fell from 1979 to 2007, from 38% to 30%. Conversely, real income for 1% increased by 275% over this period of time. The additional 8% tab was consequently stuck to the middle class whose real income did not increase at all in this period or even fell. Now you say taxing the 0.3% will not solve the problem, but you will not propose any cuts to defence will you? Reverting the tax rates to 1990s will help in some parts, but solving income inequality is the most important job Obama has to face. The rich had it good for too long, their incomes have been growing exponentially (275% my jolly), whereas for the middle class and the poor, this has not been the case .

Do note that cost of living is increasing and if the real income of the middle class and poor remain stagnant or falls, poverty rates will increase regardless of their employability status.

The rich has been helped by Reagan’s policy for a long time, but this has caused income inequality at its worst. We cannot ignore this fact and if 1% gets too much excess, we all know what top-down trickling down economics did in the Bush Jr years. Obama is truly the best shot at fixing America today whereas, arguably, Reagan was great in his time when the rich were suffering.

James: Let’s see that CBO report link. Those figures would be implausible based on numbers from the IRS that indicate the top 1% pay over 36% of the taxes collected from income. Either you made that up or you’re repeating a rumor. In fact here’s a clip from Forbes which shows clearly that Obama himself collected 815 billion more from the Bush tax cuts than Bush did. Facts are not your strong suit James:

http://www.forbes.com/sites/peterferrara/2012/12/06/why-america-is-going-to-miss-the-bush-tax-cuts/#comment-3449 According to official IRS data, the top 1% of income earners paid $84 billion more in federal income taxes in 2007 than in 2000 before the Bush tax cuts were passed, 23% more. The share of total federal income taxes paid by the top 1% rose from 37% in 2000, before the Bush tax cuts, to 40% in 2007, after the tax cuts.

In contrast, the bottom half of income earners paid $6 billion less in federal income taxes in 2007 than in 2000, a decline of 16%. The share of federal income taxes paid by the bottom 50% declined from 3.9% in 2000 to 2.9% in 2007.

The Bush tax cuts also included a doubling of the child tax credit from $500 per child to $1,000 per child. Because of that, and the 33% cut in the bottom tax rate, nearly 8 million more people dropped off the federal income tax rolls entirely, paying zero federal income taxes. Indeed, under the Bush tax cuts, the bottom 40% of all income earners not only paid no federal income taxes, as a group on net. By 2009, they were being paid cash by the IRS equal to 10% of all federal income taxes.

I honestly don’t think any bill will go through that doesn’t include spending cuts. Obviously, D.C. knows that needs to happen. That’s what is written into the mandatory fiscal cliff measures that take effect Jan. 1.

That 80 billion in revenue is the high end of estimates. 50% of that will be closer to actual revenues. Spending restraint from Obama doesn’t exist. Smoke and mirrors cuts but wants real spending now, both unemployment and more stimulus. The mistake of the so called Bush tax cuts is it is the cause of so many not paying federal taxes. Time to go over the cliff, people voted for Obama time to see taxes go up on everyone to pay for it. Then they can rethink how much big government spending they truly want.

That 80 billion in revenue is the high end of estimates. 50% of that will be closer to actual revenues. Those so called “Bush” tax cuts were poorly designed and created much of the problem of too many not paying anything in federal taxes. Time to let 100% of them expire and for those that voted for Obama to feel the pain of paying for the government they wanted. Then we can revisit the issue and try real tax reform.

I’m not the same James that posted before, but I’ve done some digging to try and find some sort of link to back him up.

The first that I found was a site that has a LOT of graphs, charts, etc. that at least *seem* to reinforce his claims: http://www2.ucsc.edu/whorulesamerica/power/wealth.html. The site seems rather less than objective, though, so I kept searching.

http://www.moneynews.com/Elias/wealth-imbalance-hurting-economy/2012/10/19/id/460627 seems to be using previous study as at least one of its primary sources. It has similar information, though, so leaving it here while I continue my search.

The partisan site http://www.currydemocrats.org/american_pie.html (obviously Democratic) contains a LOT of information as well, along with clear links or pasted images with sourced material to back up its claims. Despite the amazing information, it still seems like it has a story to sell, so it doesn’t fit what I was looking for.

Eventually I found http://www.cbpp.org/files/6-25-10inc.pdf , referencing a CBO report. Still concerned at the possible partisanship of the report (despite constant sourcing, etc.) I decided to dig into the CBO database itself, because I now had some sort of a time-frame to be looking at.

http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/115xx/doc11554/averagefederaltaxrates2007.pdf seemed somewhat close, but is primarily about just one year, not the past 30+.

http://www.cbo.gov/sites/default/files/cbofiles/attachments/Trends_in_household_income_forposting.pdf has a lot of data presented in the form of charts over the years in question, but little to go along with it.

Finally, though, after a bit of random luck, I think I have found the original CBO Report: http://www.cbo.gov/publication/42537